Daito PharmaceuticalLtd (TSE:4577) Is Due To Pay A Dividend Of ¥35.00

Daito Pharmaceutical Co.,Ltd. (TSE:4577) has announced that it will pay a dividend of ¥35.00 per share on the 6th of August. This takes the dividend yield to 3.2%, which shareholders will be pleased with.

Check out our latest analysis for Daito PharmaceuticalLtd

Daito PharmaceuticalLtd's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Daito PharmaceuticalLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 15.4% over the next year. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

Daito PharmaceuticalLtd Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥24.79, compared to the most recent full-year payment of ¥70.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. It's not great to see that Daito PharmaceuticalLtd's earnings per share has fallen at approximately 9.0% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Daito PharmaceuticalLtd's Dividend

Overall, we always like to see the dividend being raised, but we don't think Daito PharmaceuticalLtd will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Daito PharmaceuticalLtd that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.